What's happening at WeWork?

The WeWork IPO has gotten way too complicated, so here is the best summary of what’s going on that you can read in less than two minutes:

🚀 Pre S-1 Filing

• 2018 - WeWork gets pitched on IPO valuations by Morgan Stanley ($43-104B), Goldman Sachs ($61-96B), and JPMorgan ($46-63B)
• Jan 2019 - Softbank invests $2B in WeWork at a $47B valuation
• May 2019 - After Uber’s IPO, WeWork becomes the most valuable startup in the US

🗯️ S-1 Filing

• Aug 14 - WeWork files its S-1 for a September IPO, and critics begin bashing the company for everything from the mission statement…
• “Our mission is to elevate the world’s consciousness”
• to the… $700M+ given to Adam Neumann through debt and stock sales, including a $5.9M payment for the “We” trademark

📉 IPO feedback

• Sep 5 - Based on initial feedback, WeWork considers pricing the IPO in the $20-30B range, significantly below its last $47B valuation
• Sep 8 - WeWork begins considering a valuation below $20B, while investors push the company to consider postponing the IPO
• Sep 13 - WeWork makes corporate governance changes and considers a valuation of $10-12B in order to get the IPO “back on track”
• Sep 16 - WeWork makes a last-minute decision to postpone the IPO

👨‍💼 Spotlight on Adam

• Sep 18 (Wed) - WSJ publishes a profile on Adam Neumann’s drug and alcohol use, conflicts of interest, and eccentric behavior
• Sep 22 (Sun) - WSJ breaks the story that SoftBank and other board members are pushing for Adam Neumann’s removal as CEO
• Sep 24 (Tue) - After a board meeting, Neumann steps down as CEO; board names Sebastian Gunningham and Artie Minson as co-CEOs

🔮 What’s next?

• Sep 27 (Fri) - WeWork is firing ~20 execs close to Neumann, selling non-core businesses, and leaning towards pulling its IPO filing
• Sep 30 (Mon) - WeWork formally withdraws its IPO filing

Here are my three learnings from the WeWork story so far:

1. Story is critical, but eventually you have to deliver

• The market cap of all office REITs in the United States is ~$100B. WeWork’s potential has to be way bigger than that because who would want to invest in such a risky business for a 2x return?
• But eventually you need to back up your story with substance. Here’s an interesting analysis on the “BS Ratings” of different startup mission statements and how they correlate to stock performance

2. Public markets are slightly more rational than private markets

• The marginal buyer sets the price of an asset, but many private deals look like auctions because only one bidder wins
• In the public markets, many investors can buy or sell a position at any time, so it’s harder to get caught up in auction fever

3. Sentiment changes fast; investment decisions should not!

• It’s crazy how quickly the media went from portraying WeWork as a hot startup to an insane business that might go bankrupt
• If I were a late stage private investor, I would be focused on tuning out the noise and trying to figure out whether or not WeWork actually makes money and investing at the right price

‍